When people talk about life insurance, they immediately think of the working class with a family that depends on them for their income. The loss of their lives would have a devastating effect on their families’ finances, and life insurance on their lives is common to prevent such a loss. While that may be the most common demographic that requires insurance, the elderly segment of the population should not be neglected.
Why does the elderly need insurance?
There are many different reasons for retirees to get life insurance. For married couples, will the death of one spouse result in a loss of income from a pension plan? Do they want to equalize their estate so that their assets will be passed to the next generation fairly? If they want to leave an inheritance to children, grandchildren or a charity, will they have enough from their current assets or will it have to be provided with life insurance? Some seniors may believe they have enough assets that life insurance isn’t necessary, but haven’t considered what would happen if these assets depleted at an accelerated rate.
The most common reason for this is because of chronic health issues. While the life expectancy has climbed steadily over the last century, people are not living longer with good health. Did you know that the average Canadian will spend the last decade in his/her life living in sickness (1)? Many will battle diseases such as diabetes, high blood pressure, and cancer. They may require private home care services from nurses or even admittance into a nursing home.
Many also believe that all accompanying medical and accommodation costs will be subsidized by the government. Unfortunately, this is simply not true. Each case is assessed by the Regional Health Authority to determine the level of government subsidy provided. Patients may have to pay up to 80% of their after-tax income for the cost of the nursing home. Subsidized nursing home patients in BC will still have to pay $900-$3000, with other provinces having a similar price structure. With such high costs, it’s no wonder chronic illnesses end up draining a retiree’s assets much quicker than expected.
Long-term care insurance as a preventive measure
Fortunately, there is something seniors can do to prevent depleting their assets from a chronic health issue. Taking care of their health so that the disease does not arise is the number one most important factor. But having proper protection in place, such as long-term care insurance, will also help.
Long-term care insurance makes weekly or monthly payments to the insured if he or she qualifies for a claim. In order to claim, the insured must not be able to do at least 2 of 6 essential activities of daily living: bathing, dressing, toileting, transferring, continence and feeding. They can also qualify by having deteriorated mental ability, such as a loss of short-term or long-term memory.
Many seniors receiving private home care or living in a nursing home will have no trouble qualifying for the benefit. Unfortunately, by then it will be too late for them to get approved for a policy. Insurance is for the healthy, so don’t wait until it’s too late to purchase long-term care insurance.
Having long-term care insurance in place will provide peace of mind that seniors won’t run out of money during retirement, and can also ensure that they leave a legacy behind for their beneficiaries.
1. 2013 Report on the health of Canadians, The Heart and Stroke Foundation.
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